7 Metrics Crucial to Small Businesses and How to Analyze Each

Most entrepreneurs can build a product. In addition to this, finding and nurturing their first customers is not usually a difficult task for many of the good ones. But when it comes to taking their businesses to the next level, a significant number of entrepreneurs don’t know what to do. Analyzing sales statistics, trends, and data plays an important role in business growth. To help you grow your business, here’s a list of seven key metrics every small business needs to track.

Sales Revenue

As an entrepreneur, you’d want to see the numbers going up. However, you need to mine your sales data for deeper meanings and trends to determine how your company’s performance compares to others in the same geography or industry. The data needs to tie in related costs, advertising campaigns, seasonal forces, price changes, and competitive actions. In this way, you will be able to tell whether your company has the potential to compete.

Customer Loyalty and Retention

Besides attracting the right audience, businesses need to get their clients to buy as often as possible, and preferably in high quantities. Treating people how they’d want to be treated helps build this level of customer loyalty. Loyal customers are more likely to bring more clients. Statistics show that a 5 percent improvement in customer loyalty and retention might yield a 20-100 percent increase in profits. You can measure customer loyalty and retention using the following methods:

  • Customer reviews
  • Purchase analysis
  • Direct feedback at point of purchase

Acquisition Costs

You can tell whether your marketing investments are paying off by measuring the total cost of acquiring a new customer. Over time, your customer acquisition costs should go down with the growth of your business and brand image. To calculate this cost, divide your total acquisition expenses, including the cost of marketing and sales, by the number of customers acquired over a specific period.

Productivity

Measuring the productivity of your staff is important for obvious reasons. Knowing how your staff is performing gives you an insight into the inner workings of the company. While high staff productivity is a great asset, employee discontent can mean serious trouble. Productivity ratios apply to almost every aspect of your business. To determine your sales productivity, divide actual revenue by the total number of sales personnel. The same applies to manufacturing productivity, support productivity, or marketing productivity.

Although accumulating your statistics allows you to check for continuous improvement, consulting industry statistics might be the best way to compare your productivity against industry norms.

Size of Gross Margin

Gross margin is expressed as a percentage. To calculate this, divide your company's total sales income minus the cost of products sold by the total sales revenue. Keeping an eye on your gross margins is important because increased volumes should translate to improved efficiency and lower costs per unit. The higher the margin, the more your company retains from its sales in form of profits. Charging ahead when your margins are going down might hinder productivity or put the company in jeopardy.

Overhead Costs

As fixed costs, overhead costs do not depend on how much a company earns or grows, and must, therefore, be tracked separately and diligently. Examples include salaries and rents. Tracking these costs carefully can help keep them from creeping up and out of control since it allows you to see where spending occurs more clearly.

Although they are not influenced by the company’s level of productivity or growth, you can still reduce your overhead costs by switching utility suppliers and moving to a less expensive location.

Variable Cost Percentage

Any expense that changes in tune with a company's activity such as the cost of raw materials, production, shipping, and delivery is known as a variable cost. As an entrepreneur, you need to be sure your variable costs are decreasing with increase in volume. Consistency with competitive offerings and industry norms is also important. Even with increased sales and number of customers, your business won’t grow if the percentage of your variable cost goes up. As such, tracking your variable costs is important for business growth.

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